At last, the telecom industry has something to cheer about. Earlier this month, the union cabinet announced a relief package for the beleaguered industry. It relaxed the limit on spectrum that operators can hold in a circle and has allowed them more time to make deferred payments for spectrum purchased in auctions.
The new rules allow a telecom operator to own 35 per cent of spectrum in a circle, up from the existing 25 per cent limit. Further, the intra-circle cap has been removed. Moreover, operators can now pay their deferred spectrum liabilities over a period of 16 years as opposed to 10 years earlier.
These measures, however, offer only a temporary respite to operators and are far from adequate to solve their long-pending issues. The relaxation in spectrum caps is good news for only those operators that are currently undergoing merger activity and may not, in fact, be relevant once the consolidation phase concludes over the next few quarters.
Similarly, extending the spectrum payment timeline will improve operators’ liquidity in the short term, but not yield any long-term benefits as it does not change the present value of debt to be repaid.
It is pertinent to note that the industry collectively owes Rs 4.6 trillion to banks and other entities, and another Rs 3.1 trillion to the government in the form of deferred payment liabilities. Given the size of these financial obligations, piecemeal measures will not be adequate. The sector needs comprehensive solutions that can help fix the problem, not just postpone it by a few years.
It is perhaps time for the government to revisit its overall policy and regulatory framework to address the fundamental issues facing the sector, such as high taxes and levies. The industry is pinning its hopes on the new telecom policy, currently being formulated, to iron out the wrinkles and define the path to long-term, sustainable growth.
